HALIFAX, May 5, 2015 /CNW/ - Killam Properties Inc.
("Killam" or the "Company") (TSX: KMP) announced its financial and
operating results for the first quarter ended March 31, 2015.
Q1 Highlights
- Generated funds from operations ("FFO") per share (diluted) of
$0.15, a 25.0% increase from
$0.12 in Q1-2014.
- Increased same store rental revenue by 2.4%.
- Achieved same store net operating income ("NOI") growth of
5.0%.
- Completed a $27.5 million
acquisition and a $22.5 million
development.
- Achieved interest expense savings, reducing the weighted
average interest rate on mortgages at March
31, 2015, to 3.51% from 3.60% at December 31, 2014.
Financial
Highlights (in thousands, except per share amounts)
|
|
|
|
|
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For the three
months ended,
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Mar 31,
2015
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Mar 31,
2014
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Change
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|
|
|
|
Property
Revenue
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$39,536
|
$35,065
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12.8%
|
Net Operating
Income
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$20,655
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$17,620
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17.2%
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Income Before Fair
Value Losses, Gain on Disposition, and Income Taxes
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$9,122
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$7,046
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29.5%
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Fair Value
Gains
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$793
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$0
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n/a
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Net Income
Attributable to Common Shareholders
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$6,922
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$4,869
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42.2%
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Earnings Per Share
(diluted)
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$0.11
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$0.09
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22.2%
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Funds from
Operations
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$8,922
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$6,827
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30.7%
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Funds from Operations
per Share (diluted)
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$0.15
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$0.12
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25.0%
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As
at
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Mar 31,
2015
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Dec 31,
2014
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Change
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Total
Assets
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$1,827,490
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$1,775,234
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2.9%
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Total
Liabilities
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$1,151,797
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$1,112,551
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3.5%
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Total
Equity
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$675,693
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$662,683
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2.0%
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Total Debt to Total
Assets
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55.1%
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54.9%
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20 bps
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25% Growth in FFO per Share
Killam generated FFO per share
growth of 25.0% quarter-over-quarter, earning $0.15 per share in Q1-2015 compared to
$0.12 in Q1-2014. The earnings growth
was primarily attributable to same store property NOI growth of
5.0%, contributions from acquisitions and stabilized developments,
and interest expense savings from refinancings.
Strong NOI Growth in Q1
Consolidated same store results for the three months ended
March 31, 2015, and 2014, are
summarized below:
Consolidated Same
Store NOI (in thousands)
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|
|
|
For the three
months ended,
|
Mar 31,
2015
|
Mar 31,
2014
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%
Change
|
|
|
|
|
Property
Revenue
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$34,619
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$33,804
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2.4%
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Property
Expenses
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|
|
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Operating
Expenses
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(5,803)
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(5,766)
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0.6%
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Utility and Fuel
Expenses
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(6,927)
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(7,044)
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(1.7%)
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Property
Taxes
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(4,022)
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(3,977)
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1.1%
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Total Property
Expenses
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(16,752)
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(16,787)
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(0.2%)
|
Net Operating
Income
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$17,867
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$17,017
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5.0%
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Killam's same store revenue
grew by 2.4% in the quarter, achieved through increased rental
rates, an 80 basis point improvement in apartment occupancy levels
and a reduction in rental incentives. All regions contributed
positively to revenue growth, with the largest gains realized in
St. John's, Fredericton and Ontario. Killam's Halifax portfolio, which accounted for 40% of
the Company's same store apartment NOI in Q1-2015, generated a 2.1%
increase in revenue growth, attributable to a 70 basis point
improvement in occupancy and a 1.5% increase in average rents.
Killam's same store total
property expenses decreased by 0.2% in Q1-2015, contributing to the
5.0% NOI growth. During Q1-2015, the Company benefited from lower
oil prices, with the apartment portfolio enjoying a 24.4% reduction
in oil expense. Total natural gas costs were comparable
quarter-over-quarter, as higher natural gas prices in both
Halifax and Ontario offset lower pricing in New Brunswick. Killam successfully managed controllable costs
through a continued focus on regional efficiencies. Despite a 15%
increase in snow removal costs as a result of record snowfall in
many of Killam's core markets in
Atlantic Canada in Q1-2015,
operating expenses increased by only 0.6%.
$28 Million Acquisition
Completed in Q1
On March 31, 2015, the Company
completed a $27.5 million acquisition
in Halifax. The acquisition
includes a modernized heritage complex, with 158,000 square feet of
office and retail space, for $22.3
million, representing a capitalization rate of 7.0%.
Killam also acquired a 50%
interest in 47,650 square feet of vacant land adjacent the
commercial property for $5.2 million.
An approved development agreement allows for the construction of a
280-unit multi-residential property on the vacant land.
Killam and its 50% partner
expect to begin construction during the second half of 2015.
Management continues to look for acquisition opportunities and has
maintained its 2015 target of completing $75
million in acquisitions, with 50% of acquisitions outside
Atlantic Canada.
Developments Contribute Positively to FFO
Killam completed the 102-unit
Chelsea Place development in
St. John's during the first
quarter and the property is currently 87% leased. Developments,
including Chelsea Place and two
projects completed in 2013 and fully stabilized during the second
half of 2014, contributed $0.3
million to FFO growth in the quarter.
The Company's 122-unit Saginaw Gardens development in
Cambridge, Ontario is expected to
be completed during the second quarter and is currently 39%
pre-leased. Saginaw Gardens is expected to contribute
positively to FFO during the second half of 2015.
Interest Expense Savings on Mortgage Refinancings
Killam benefited from interest
rate savings on mortgage refinancings during Q1-2015 and reduced
its weighted average mortgage interest rate to 3.51% from 3.60% at
December 31, 2014. Total debt as
a percentage of total assets was 55.1% at March 31, 2015, compared to 54.9% at December 31, 2014. Killam's interest coverage ratio for the last
twelve months was 2.25 times, up from 2.18 times at December 31, 2014.
Management's Comments
"We are pleased to present strong financial results for the
first quarter", noted Philip Fraser,
Killam's President & CEO. "FFO
per share growth of 25% reflects the positive impact of our recent
acquisitions and developments, and 5% NOI growth from our same
store properties."
"Realizing revenue growth from our existing portfolio is
important for Killam's FFO per
share growth. We are pleased to have achieved occupancy improvement
from our stabilized properties this quarter, as well as increased
rental revenue in each of our core markets. Killam's committed employees are making the
difference by focusing on strong customer relationships and keeping
our properties well maintained."
"Lower utility costs also contributed to the 5% NOI growth.
Unlike the last two years, where Q1 utility costs increased by
18.5% and 19.2% (2014 and 2013), utility costs were down 2.0% for
our same store properties in Q1-2015. Although natural gas prices
remained high during the winter in Atlantic Canada, Killam realized a 1.1% savings in same store
natural gas expense in the first quarter of 2015. Lower oil costs
also contributed to utility savings."
"The strategy of geographic diversification and increased
investment in Ontario and
Alberta is reflected in
Killam's Q1-2015 results, with
19.9% of apartment NOI generated in Ontario and Alberta, compared to 12.7% in Q1-2014. We look
forward to growing Killam's
investment in these regions to reach our goal of generating 50% of
Killam's NOI outside Atlantic Canada."
Financial Statements
Killam's Q1-2015 Financial
Statements and Notes, and Management's Discussion and Analysis can
be found under Financial Reports in the Investor Relations section
of Killam's website at
www.killamproperties.com/investor-relations.
Results Conference Call
Management will host a conference call to discuss these results
on Wednesday, May 6, 2015, at
9:00 AM Eastern. The dial-in numbers
for the conference call are 647-427-7450 (in Toronto) or 888-231-8191 (toll free, within
North America).
A live audio webcast of the conference call will be accessible
on the Company's website at
www.killamproperties.com/investor-relations/events-and-presentations
and at www.newswire.ca.
Corporate Profile
Killam Properties Inc., based in Halifax, Nova Scotia, is one of Canada's largest residential landlords,
owning, operating and developing multi-family apartments and
manufactured home communities.
Non-IFRS Measures
There are measures included in this press release that do not
have a standardized meaning under IFRS and therefore may not be
comparable to similarly titled measures presented by other publicly
traded companies. The Company includes these measures as a means of
measuring financial performance.
- Net operating income is calculated by the Company as income
from property operations.
- Funds from operations are calculated by the Company as net
income plus deferred tax expense and depreciation on owner-occupied
property, less fair value gains and non-controlling interest.
- Same store results in relation to the Company are revenues and
property operating expenses for stabilized properties the Company
has owned for equivalent periods in 2015 and 2014.
- Interest coverage is calculated by dividing the earnings before
interest, tax, depreciation, and fair value adjustments by interest
expense.
See the Q1-2015 Management's Discussion and Analysis for further
details on these non-IFRS measures.
Note: The Toronto Stock Exchange has neither approved nor
disapproved of the information contained herein. Certain
statements in this report may constitute forward-looking statements
relating to our operations and the environment in which we operate,
which are based on our expectations, estimates, forecast and
projections, which we believe are reasonable as of the current
date. Such forward-looking statements involve risks,
uncertainties and other factors which may cause actual results,
performance or achievements of Killam to be materially different from any
future results, performance or achievements expressed or implied by
such forward-looking statements. For more exhaustive information on
these risks and uncertainties, you should refer to our most
recently filed annual information form which is available at
www.sedar.com. Readers, therefore, should not
place undue reliance on any such forward-looking statements.
Further, a forward-looking statement speaks only as of the date on
which such statement is made and should not be relied upon as of
any other date. Other than as required by law, Killam does not undertake to update any of
such forward-looking statements.
SOURCE Killam Properties Inc.